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Oh someone has written the Business 101 course. It doesn't say anything about throwing money away on image advertising to an investor audience when you should be marketing (that's much broader than just advertising) to a targeted audience who might want to buy your product.
Image advertising is something that a Boeing, a NAACP, a BP, a GE, even a Red Cross does. It's there to change or create a certain attitude towards an organization. It's very expensive and takes a long time to influence prople's opinions. It sells nothing. It's not designed to sell anything.
The vast majority of the money the company has blown on its advertising budget was, IMO, completely useless. I'll bet that after spending, say $150,000, on advertising, maybe 60,000 people on planet earth could tell you who CyberKey is, what it does, and how it can benefit their lives. So that's about $2.50 per person informed. And of that 60,000, how many could name 1 product the company offers? How about 2? I'd say maybe 1,200 people tops. Do youremember the last football or baseball program you bought? Can you remember what local restaurant advertised in it and what their specialty was? Of course not. This kind of advertising takes years to build an effect.
Why JP is targeting the consumer market is way beyond my understanding. It's a DRM product first and foremost. Sure, it does a few other things, but even most of these other things are of far greater value to businesses than consumers. Consumers may eventually buy them as part of a larger product or service package, but why bother spending huge sums to educate consumers that you make the the part? How many of the world's 10,000 chip and electronic component companies have you heard of? 4? 12? Yet you still buy their parts when you buy a TV, IPod, stove, car, etc.
Sorry, the same third graders who worked on the financials also decided on the ad campaign. You don't get sued for this mistake. You just wake up one day and find that you're broke and have nothing but a bunch of framed ads on the wall to remember your company's former cash.
"100 % evidence of company operations at capacity to meet consumer demand"
What evidence exists of this? What proof is there of viability either? A few sales do not imply viability. A competitive advantage coupled with a well defined market need and competent management are key ingredients in creating viability. Where are these things?
Can you determine what competitive advantage the company offers in the MyChildIDKey marketplace? Have you ever seen a sales projection for this product? How many have been sold? How are they being sold - retail stores, mail order only, to schools, to police departments, to governments for free distribution? Any ideas that would indicate viability?
Msgbrdinfo - I read your posts for no other reason than because you're funny stupid.
So my post to Seabiscuit was absurd because CyberKey, just like Black & Decker, can become a very successful reseller of others technology. That seems to be the jist of your argument, yes?
Hmmm. Where to start.
First, Black & Decker is not a reseller. They are a manufacturer and distributor. Whether they own their own plants is not important. Products are manufactured specifically for them, to their unique specifications, in compliance with their own patents and standards just as they would if they made them themselves. They are not simply a reseller. They may slap their name on a few generic products, but those products are pure gravy enabled because A) they have a well known and respected brand name and B) they have a tremendous distribution chain.
Secondly, let's compare CLHS and B&D
CKYS B&D
Unique product set ? Many
Well developed dist chain No Yes
Name recognition No Yes
Economies of Scale No Yes
Marketshare No Yes
Quality Management No Yes
Ability to raise $ No Yes
Well develop-ed competitive adv.No Yes
I think we can stop there. I think the point is made. CYKS is not a junior B&D. B&D is not a simple reseller or VAR. CKYS may be a Value Added Reseller (VAR), and I suspect that this classification is accurate if the patents and capabilities truly exist.
There's nothing wrong with being a VAR, if you are selling into markets in which the value you add is critical to the organization using the product. MyChildKey and some of the other products currently offered do not fit that model. They are sledgehammer sales in the flyswatter market. There is no long term future in selling in the wrong markets.
Seabiscuit - Again, my thanks for the elegant reply. Let me state my position for the record. There are two major concerns going forward that shareholders (and probably their attorneys) are going to need resolved. The first concerns the the existence and terms of the $25 million government contract. Personally, I'm guessing the contract is real but the profit margins are grossly overstated. But that's just my opinion.
The second, and far more important concern is how real the patents are and whether the company has actually made any progress in marketing the product in industries which need exactly what a CyberKey product does. The patent information we have been provided seems to change almost as much as the audited financial information. First they are done and filed, then they are pending. So who knows? All I know is that nothing showed up on the UAF's that would indicate the existence of a patent registered to the company. (It should be listed as an other asset). Again, that may be the third grade accounting kicking in, or it may be true as stated.
If the patents do not exist, then there is nothing here. There can be no tomorrow, regardless of the outcome with the SEC. The company is simply as reseller and repackager of other people's technology and offers virtually no competitive advantage. That would be disasterous for all of us. But here again, my personal opinion is that the technology and patents do exist, although I have no clue as to what condition they are in.
All in all, one cannot say with any authority that any crime has been committed or any intent to defraud is yet verifiable. We may find out more in the near future, but as for right now, one cannot make that case conclusively.
What we can state conclusively is that company management has failed to perform the simplest of managerial tasks in a stunning manner. Getting one's stock suspended from trading by failing to adequately respond to a letter from the SEC is world class stupidity. And then, if we assume that the SEC inquiry was made prior to the date the UAF's were released, to file numbers created by a team of chocolate milk drinking third graders and signed off as official by the CEO and Chairman of the Board is spectacularly stupid. It belongs in the Guiness Book of Stupid Management Blunders.
That's my take on all this. I believe that the basic building blocks upon which this company was begun are probably intact and legit. My deepest concerns deal with the quality of management, the direction they have taken this company in, and their poor decision making capabilities as evidenced by a series of actions that we now all see.
Well stated, Whiteshadow. I think that summed it up very well.
Seabiscuit - Sorry for the delay in responding, but my job tends to get in the way of my important posting postion.
I truly appreciate your thoughtful response to my post. It was well reasoned and almost accurate. Now that Liquidcool has publicly posted that the audit details may be bogus, I realize that the situation has changed. However, I cannot hold someone accountable for informaton that comes to light after their post.
Let's consider what you posted. First, your contention that conmpanies often fudge on their PR's is a pure fabrication on your part. Legit companies make it a policy to understate and over-perform. I know of several pink sheet companies who believe that their entire cerdibility is wrapped up in living up to what they say. Lying is NOT endemic to pink sheet companies. It is only endemic to those who cheat.
Let's also consider this mythical basher campaign. No such campaign existed prior to the suspension, though I have to believe that one or more campaigns now exist after the suspension. A major class action suit is coming. It's as predictable as the sun coming up in the east tomorrow morning. Jim has what, 400 million shares? And how much is Krautheim worth, $3 million, $5 million, $78,000 who knows? But I'm sure some lawyer will know very soon.
This screw-up has cost shareholders about $4 million by my estimation. JP doesn't have $4 million. Maybe Joel does. I seriously doubt Heaton does. Somewhere, there is either going to be a major wealth redistribution, or there is going to be a change of management. Just a guess on my part, but that's how I see things being played out.
Finally, your call on why the bashers are so intent on destorying JP reflects an attitude that incompetence is acceptable in the executive suite. It is not. Never has been, never will be. This disaster is solely self induced. Don't even try blaming outside sources. This SEC debacle is 100% self induced. We need to consider as shareholders who have been harmed by the actions of management and if we want to allow existing management to continue to run the company. Maybe the evidence says that they deserve another chance. But maybe it tells us that they need to go in favor of more professional management. The jury is out on this, IMO. But the evidence is beginning to stack up.
Seabiscuit - If you understood the process that the SEC goes through internally to reach the point where we are at today, you would understand why some guilt is already proven. It may not be civil or criminal guilt. But it surely can be categorized as managerial guilt. In short, one has to earn a trading suspension. They are not issued on a whim. This much is fact.
When people are arrested in this coutry who are suspected of commiting serious crimes, they are presumed innocent while behind bars.
As for the alleged deposition, do you have first hand knowledge of this or is this another myth? Did you see a PR about it? Did you talk to the company about it? Did you contact BA about it? Or are you just repeating a story floating around the boards possibly created by people placing wishes over reality?
Whiteshadow - the answer is simple. IF there really is something here to build upon, we need to let the legal system run its course in the hopes that those who have been wronged can inherit the company, install management that makes good decisions and moves the company forward.
It's that simple. Is it worth the time and effort to press the case to change the board of directors? I don't know the answer to that question. I do believe that the ability to do so may soon collectively be in our hands.
You can continue to follow the course that's been set or seek a clean sweep and try again. There are no other alternatives. Either you are comfortable with the status quo or you aren't. The time to vote will inevitably come. As vultures follow a pack of weary and thirsty animals, so lawyers follow SEC suspensions caused by self inflicted injuries. Night follows day. Lawyers follow trajedy.
But this may actually be opportunity. Stop cheerleading and learn all you can about the company, its technology and the markets. Then you can intelligently decide how to cast your votes when the time comes.
Msgbrdinfo - do you read your posts after you get through writing them or do you just ramble and then hit 'send'.
Even in a pattern of lies or enormous mistakes, logic threads appear to those who spend just a few minutes to look at things and piece together the evidence. I've only had a few accounting courses and a dozen or so finance courses in my life so there's still a lot I don't know. But I'm more than capable of decifering a third graders attempt to obfuscate a few things that may be better off left unseen.
Nobody who reads 'The Little Engine That Could' ('I think I can, I think I can') or 'Touchdown for Tommy' between financial statement prep gigs is going to fool me for long.
Call me a liar if you want. Your opinion means nothing. Or, you could call TDAmeritrade and buy them tomorrow AM. $0.0135 x 134,200 = 1,811.70 plus a small commission. Surely, you have the jack. With your investing prowess, you must have millions. Why not drop a few bucks my way? I'll think much better of you and you'll know that I wasn't lying.
See, we both win. Drop me a PM when you make the buy and I'll even sign up for this service to PM you back. Time for you to put up or shut up also.
And I'll expect that you'll be man enough to publicly acknowledge your poor judgement of character when the alternative situation prevails.
You are suggesting that CEO's are paid to do not what's best for the company, but what a few dozen shareholders want? But hey, doesn't JP own controlling interest? Did he scream at himself to release the numbers too? And did he demand that they not spend another nickel on seeing to it that they were at least plausible?
Sorry pal. The cries of liliputian shareholders should mean nothing when it could be harmful to comply with their wants. That's why he gets the big bucks.
I already said I did. They are for sale on TDAmeritrade at $0.0135. 134,200 speckled beauties. Want 'em?
Loanstew - of all the things I found interesting on the UAF's, nothing made me laugh harder than the 'Sale of Stock' line in the Owner's Equity section.
I have my guesses as to what this is. First, we all agree that this is a 'non-standard' financial statement entry, LOL. There must have been extra Bosco in the chocolate milk at St. George Elementary the day the company's accountants came up with this one. Frankly, I love it. It's actually funny.
I think it is designed to do two things. These are only my assumptions and subject to the usual note that I've been wrong before and will be again. Reason 1 - it hides the number of shares outstanding. The company appears to have a par value of $0.001/share. So if the 6 month number was right, $450,000 in capital stock = 450 million shares. That passes the smell test. So if the company had 700 million outstanding, capital stock would be 700,000 at year end.
But that's a bit too easy to see. Even the third graders knew that Ihub board readers could see that relationship. And if the number should have been 700,000, what if the reported number was 850,000 or 900,000. That would cause a concern.
Reason 2 is that if you are selling stock below market price, it's too easy to divide cash raised by shares increased to get avg price per share sold. But if you hide the denominator, some smart axx can't do the division and see the correct answer.
That's my take on the situation. Those are pretty clever third graders. They deserve credit for creativity. an
Msgbrdinfo - I guess you just don't get it. JP issued the UAF's for a reason. I have no idea what that reason was because it was not required.
Let's think this through. Why would someone issue numbers, regardless of their accuracy, if they didn't have to or hadn't made a normal practice of issuing numbers at about the same time every year at that time? What if, and it's just an if, but what if you needed to raise capital by selling stock into the noise created by the issuance of the UAF's?
Whether the stock went up or not as a result is not so important. What's important is the volume to cover the dumping. Again, this is entirely theoretical as we have nothing official to know what the true outstanding share count is.
Why would someone issue numbers that were clearly not run by a CPA to the world? And especially, why would you do that if the feedback you received on your mid-year financials also was one of elementary school accounting competence?
There has to be a reason. There can be no explanation for issuing numbers in this fashion without some rationale for doing it. What's your guess?
They are offered at $0.0135 now and have been since trading resumed. You can contact TDAmeritrade and snap them up tomorrow morning. I have 134,200 shares for sale there.
If you think losing money due to the stupidity of others is amusing, amuse yourself with another 134,200 shares.
Time to put up or shut up. Ball's in your court.
What if they made the $25 Million sale to the govt, but the margin was 20% and not the 51% or so reported. Would that make a difference? It certainly would to me as an investor. How were these sales financed? Is that important? Again, as an investor, it is to me.
Accounting numbers, like words in a legal document, have very specific meanings. When the accounting function is performed by third graders, it reflect poorly on the entire organization, and especially its management and the Board of Directors.
Listen - your ignorance is getting the better of you. Its not sufficient to tell you that the retained earnings number cannot be right. You have to explain why it can't be right and therefore why it is obvious to even a well educated fourth grader. That takes time. And it's more than clear that you know as much about financial statements as I know about cold fusion.
Nothing is secret. Even the SEC noticed some of it and referenced it in their order of suspension.
The problem is that to do the job right takes time. The problems are numerous. It's not a trivial exercise.
I don't really have the time to write it. I could make the time, I suppose. But I want three CPA's to torture in return. If they really see no problems, they need to be held up to public ridicule and license revocation. Even the SEC picked up on the problems in a heartbeat. When government gets it, you know its obvious.
I'll make you a deal. You forward to me the names and addresses of the three CPA's, and I'll send you a multi-page description of the errors in the report. They need to have their licenses revoked befor they do any more damage.
If the financials that the company has issued previously don't seem like they were written by third graders, may I seriously suggest that you should not be investing in companies that are unaudited. If you can't do the accounting yourself, maybe you should be dealing with companies in which accounting is rarely an issue.
This is not an indictment on you or anyone else who hasn't a solid understanding as to why the statements appear deeply flawed. It's simply a question of training. I personally avoid many high tech and medical companies simply because I don't have the benefit of substantial subject knowledge to evaluate how good the technology being offered is and how big the marketplace may be. Why not take the same approach when it comes to accounting? Why invest in things in which accounting is such a critical issue?
The other alternative you might consider is working for JP in his accounting department. It's clear no one there knows the subject matter either, so you'll be instantly promotable!
People are so obsessed with CyberKey because it's so rare to see a company perform a self-induced melt down in real time. It really is a facinating thing to watch.
First, there's the constant source of friction on this board between those who believe JP just made a small mistake and all will soon be well, those who are beginning to have doubts, and those who either never believed in his abilities or have since come to that way of thinking.
Then there's the interaction between the company and the SEC, various strategic partners, and its customer base. This area is not very visible to us average investors. However, speculation runs rampant based on snippets of information regarding travel plans, product announcements, etc.
And then there's the company's relationship with its shareholders and its IR firm. If the IR firm has a contract that gives them the right and requirement to review every PR BEFORE it is issued (as I'm guessing any standard IR contract would), then who is responsible for the junior high accounting on the mid year and year end financials? Is there nobody in either organization that ever took an accounting class and actually learned something for their 3 credit?
This is the stock market equivalent of Anna Nicole Smith, or anything Michael Jackson or Britney does. It's become a disaster and now the quetion is can JP pull it back from the brink or does it fall into oblivion.
CKYS is a soap opera well worth the price of my hundred thousand shares or so to watch.
Now THAT'S funny.
Janice - The problem here is not so much that the business concept has proved to be infeasible. The problem here seems to be one of a management insufficiently prepared to run a public company. The wounds here, assuming that the products, sales and patents are real, is totally self-inflicted.
Penny stocks are gambles. I play for the 10 and 20 baggers just like everyone else. You pay your money and take your chances. But you just don't expect to get tripped up by your own management. There's enough financing and competitive pressures out there to make survival and growth hard enough for baby companies. The self inflicted abuse is inexcusible.
Janice - don't confuse the issue with facts. There are people on this board who think this is all an organized plot to 'get CyberKey' and that anyone who has said anything negative either on the board or to the SEC is going to be fined or jailed or both.
It has to be something in the water. I cannot explain how people wealthy enough to invest money in pink sheet stocks are just not wise enough to look at the current state of affairs, realize why things are and see that it's not good at all. If the financials we received in January were at all reliable, we'd have a pretty good indication of whether this company can go on without external financing much longer. Unfortunately, one cannot rely on financials cranked out by novices. So we all remain in the dark.
I'm still waiting for the only piece of DD that I can either trust or seek redress over if it turns out not to be true. Only the AF's matter. Everything that has been thought and said in the past is just empty words. It matters not what is said nor the reaction to it. It's all speculation without the penalty of law if it turns out not to be true.
And I was ENTITLED to believe the NY Jets were going all the way this year, even if betting that way was simply suicidal. Wake up. This is an investment, not a sick child. It would be nice if ordinary people had the ability to short penny stocks, but we don't. Then we wouldn't have this natural tendency to substitute hope for plans, and rumors for truth. We could make money on either the long or the short side.
This has been a short since the first financials were issued. The second set proved beyond any doubt that nothing was learned in the intervening five months.
Welsrev - Do 'bright and talented people' have their stock suspended by the SEC for failing to respond to a letter of inquiry? Do they issue financial statements with obviously questionable line items?
The company does not control the pace at which the audit is performed. Clearly, the company can slow it down by dragging their feet in responding to auditor requests for more information. But they can't make the process go any faster. It will take what it takes. And if the financials that were released recently are any indication of the state of company record keeping, it will take months.
Welsrev - This is the company's first audit. Despite the opinion of some posters and that of an obviously unsophisticated management, the process can take months longer than some anticipate.
Since the SEC problem, the auditors must maintain a degree of dotting i's and crossing t's that few other companies must endure. IMO, to state publicly that this is going to take a few weeks would be another poor decision on top of those already made.
As for Seabisquit's oft repeated admonition that this entire SEC episode has something to do with some vast conspiracy to steal the company's patents by an organized group of naked shorters, I suggest you disabuse yourself of that notion before they find a paded cell for you too. There is not a shred of truth to this assertion. I suspect we'll know the real reason for the proliferation of shares traded prior to the suspension if and when the audited financials come out. Don't hold your breath.
Olemiss - the technology to turn any electronic device on or off was developed a few decades ago. The technology is called X10. It has fallen into a kind of dormancy in recent years. Radio Shack is the world's largest retailer of this technology, though if you go into a Shack and ask the clerks about it, most won't have any idea about what you are talking about.
There's tons of X10 info and products on the Internet.
IMO, a biometric front end on this is completely unnecessary as a simple code will do. Why you would need security on an appliance activation/deactivation device is beyond me. Neither my toaster, my TV, nor my hot water heater require security now. Why they would 6 months from now escapes me.
Now Invest - You almost nailed it when you said 'And as stated you don't have to be a CEO to understand SOUND business Practices.'
Flip that around and you have it right. You must understand SOUND business practices to be a CEO. That gets to the heart of the matter.
CEO is not an honorary title. It requires skills, knowledge, and certain core competencies.
I would beg to differ that the SEC wouldn't touch Michael Dell or his company if he put out factually untrue news.
However, I am 100% certain that a class action lawyer would be all over it like white on rice in a NY minute. The penalty is not always extracted by the government. The public has other means to seek remedy.
Integrity is not the issue. The issue is consequence. What happens to Mr. Dell and his company if he puts out a statement he should have known to be untruthful?
Does it happen? Of course it does. Is it done intentionally? Again, the answer is yes at times. Are the consequences nearly always corporate death or ,at a minimum, a serious financial penalty for such utterances? Yes, again.
Does the same standard hold on the pinks or grays? You be the judge. My experience tells me no.
Then go and be happy with what you believe. You've already bought into CKYS's party line. Now you can add your biases towards its possible shareholders to the list of things you know to be true.
Maybe it's me, but I see a small diference between a Dell announcement and a now gray sheet stock company announcement. Again, perhaps my bias shows through, but I see some consequences if Michael Dell signs something he should know is not true.
I'm not sure I see the same rigorous standard either applied by external forces or maintained within the organization of a now gray sheet company.
Sorry, Todd, this is a fool's errand. It won't happen.
Believe what you want to believe. I think you'll fnd out who owns shares and who doesn't if this issue winds up in front of a judge.
At best, you can determine that the float exceeds the number you believe it to be. However, the float number is of no concern to me. That number is largely articicial and can change with each passing week as chares come off restriction.
What concerns me deeply is the number of shares outstanding. We have been told one number, which the UAF's failed to validate. We all noted the 200% increase in authorized shares well in advance of any acquisistion need (they could just have easily been announced concurrently). And we have heard nothing official from the only source that can truly say what that number is, the transfer agent.
Float doesn't concern me. Shares outstading and the credibility of those indicating that 700 million was the year end figure concerns me.
And it is still active for exactly what reason? Another managerial oversight?